Intro to Microeconomics: Chapter 5 Practice Questions

a) binding price ceiling

A _____ is set below the equilibrium price for a good. a) binding price ceiling b) nonbinding price ceiling c) binding price floor d) fair price

c) price floor

A binding _____ is set above the equilibrium price for a good. a) price ceiling b) price ceiling and price floor c) price floor d) fair price

b) price ceiling

A(n) _____ is a maximum price for a good. a) equilibrium price b) price ceiling c) price floor d) marginal cost

c) price floor

A(n) _____ is a minimum price for a good. a) equilibrium price b) price ceiling c) price floor d) marginal cost

d) there will be no effect

If the equilibrium price for a bushel of wheat is $6.50, what will be the effect of the government imposing an $8 price ceiling? a) Consumers will benefit. b) Producers will benefit. c) Both consumers and producers will benefit. d) There will be no effect.

a) buyers will benefit

If the equilibrium price for a bushel of wheat is $8.50, what will be the effect of the government imposing an $8 price ceiling? a) Buyers will benefit. b) Sellers will benefit. c) Both buyers and sellers will benefit. d) There will be no effect.

a) consumers will benefit

If the equilibrium price for a gallon of milk is $3, what will be the effect of the government imposing a $2 price ceiling? a) Consumers will benefit. b) Producers will benefit. c) Both consumers and producers will benefit. d) There will be no effect.

b) quantity demanded exceeds quantity supplied and a shortage occurs

If the equilibrium price of solar panels is $200 per panel, but a price ceiling of $150 per panel is imposed, what happens to the market for solar panels? a) quantity demanded exceeds quantity supplied and a surplus occurs b) quantity demanded exceeds quantity supplied and a shortage occurs c) quantity supplied exceeds quantity demanded and a surplus occurs d) quantity supplied exceeds quantity demanded and a shortage occurs

c) a surplus of sugar will occur, increasing inefficiency

If the government guarantees sugar farmers a price of $1 per pound when the market equilibrium price is actually $0.50 per pound, which of the following will occur? a) A shortage of sugar will occur, increasing inefficiency. b) A shortage of sugar will occur, decreasing inefficiency. c) A surplus of sugar will occur, increasing inefficiency. d) A surplus of sugar will occur, decreasing inefficiency.

a) $0

In the figure below, what is deadweight loss equal to if a price ceiling is imposed at $8? a) $0 b) $60 c) $70 d) $140

c) $70

In the figure below, what is deadwight loss equal to if a price ceiling is imposed at $5? a) $3 b) $60 c) $70 d) $140

b) there will be an increase in the quality of existing apartments in rentville

Suppose that the city of Rentville sets a price ceiling of $800 a month on all apartments, despite the market equilibrium rent being $1,000. Which of the following is least likely to occur? a) There will be a shortage of apartments in Rentville. b) There will be an increase in the quality of existing apartments in Rentville. c) There will be a decrease in new apartments being built in Rentville. d) The demand for apartments will exceed supply in Rentville.

b) price ceiling

Suppose the equilibrium price in a market is $10. If the government decides to set a maximum price of $8, this would be an example of a(n): a) equilibrium price. b) price ceiling. c) price floor. d) fair price.

b) binding price ceiling

Suppose the equilibrium price in a market is $10. If the government sets a maximum price of $7, this is an example of a(n): a) equilibrium price. b) binding price ceiling. c) binding price floor. d) fair price.

d) price floor

Suppose the equilibrium price in a market is $10. If the government sets a minimum price in the market of $14, this is an example of a(n): a) equilibrium price. b) price ceiling. c) fair price. d) price floor.

c) binding price floor

Suppose the equilibrium price in a market is $10. If the government sets a minimum price of $12, this is an example of a(n): a) equilibrium price. b) nonbinding price floor. c) binding price floor. d) fair price.

c)binding price floor

Suppose the equilibrium price in a market is $10. If the government sets a minimum price of $14, this is an example of a(n): a) equilibrium price. b) nonbinding price floor. c) binding price floor. d) fair price.

b) nonbinding price ceiling

Suppose the equilibrium price in a market is $11. If the government sets a maximum price of $13, this is an example of a(n): a) equilibrium price. b) nonbinding price ceiling. c) binding price floor. d) fair price.

a) fewer patients

Suppose the government sets the maximum price for a normal doctor's visit at $20, but the current market price is $40. As a result of this government action, doctors will see: a) fewer patients. b) the same number of patients. c) more patients.

a) cause a shortage of 5 units

The figure shows the market for portable DVD players. Assume the government imposes a price ceiling set at $25. This will: a) cause a shortage of 5 units. b) cause a surplus of 5 units. c) have no effect. d) increase quantity supplied by 5 units.

a) cause a shortage of 4 units

The figure shows the market for portable DVD players. Assume the government imposes a price ceiling set at $30. This will: a) cause a shortage of 4 units. b) cause a surplus of 4 units. c) have no effect. d) increase quantity supplied by 4 units.

c) have no effect

The figure shows the market for portable DVD players. Assume the government imposes a price ceiling set at $40. This will: a) cause a shortage of 7 units. b) cause a surplus of 7 units. c) have no effect. d) increase quantity supplied by 7 units.

c) have no effect

The figure shows the market for portable DVD players. Assume the government imposes a price floor set at $40. This will: a) cause a shortage of 2 units. b) cause a surplus of 2 units. c) have no effect. d) increase quantity supplied.

b) cause a surplus of 4 units

The figure shows the market for portable DVD players. Assume the government imposes a price floor set at $50. This will: a) cause a shortage of 4 units. b) cause a surplus of 4 units. c) have no effect. d) increase quantity supplied.

b) cause a surplus of 6 units

The figure shows the market for portable DVD players. Assume the government imposes a price floor set at $55. This will: a) cause a shortage of 6 units. b) cause a surplus of 6 units. c) have no effect. d) increase quantity supplied.

c) the minimum wage has no effect in this market

What should the government do in order to reduce the effects of a shortage caused by a price ceiling? a) It should lower the price ceiling to $0. b) It should lower the price ceiling slightly. c) It should leave the price ceiling where it is. d) It should raise the price ceiling.

d) it should raise the price ceiling

What should the government do in order to reduce the effects of a shortage caused by a price ceiling? a) It should lower the price ceiling to $0. b) It should lower the price ceiling slightly. c) It should leave the price ceiling where it is. d) It should raise the price ceiling.

d) a law states that gasoline cannot be sold for more than $3 per gallon

Which of the following is an example of a price ceiling? a) A car salesman says that he cannot sell a car for less than $10,000 because he will not make a profit on the sale. b) A house does not receive any offers because the sellers are asking too much money for it. c) A law states that gasoline cannot be sold for less than $3 per gallon. d) A law states that gasoline cannot be sold for more than $3 per gallon.

d) a legally mandated minimum wage for food-service workers

Which of the following is an example of a price floor? a) A job that pays below the minimum wage. b) A job position that does not get filled because its salary is too low. c) A maximum wage limit on corporate executives. d) A legally mandated minimum wage for food-service workers.

c) $4

Which of the following prices would be a binding price floor for strawberries if the current equilibrium price is $3 per pound? a) $2 b) $3 c) $4 d) none of the above

b) dead weight loss

_____ is a loss in total surplus that results from an inefficiency in a market with a price ceiling or price floor. a) Consumer surplus b) Deadweight loss c) Government tax revenue d) Producer surplus